Asian in­surance mar­ket: Growth pause in 2018, but re­turn to high growth in sight

Daily Mirror (Sri Lanka) - - FINANCE -

Ac­cord­ing to the pro­jec­tions by Al­lianz Re­search, the global in­surance pre­mium vol­ume last year rose to 3,655 bil­lion eu­ros (excluding health in­surance). Com­pared to 2017, the nom­i­nal in­crease ad­justed for ex­change rate ef­fects is 3.3 per­cent.

It was the third year in a row (or the 12th out of the last 15 years) that global pre­mium growth lagged be­hind the ex­pan­sion of eco­nomic ac­tiv­ity (+ 5.7 per­cent nom­i­nal growth in 2018). In­surance pen­e­tra­tion (pre­mi­ums as a per­cent­age of GDP) has thus fallen to 5.4 per­cent – the low­est value in the last 30 years.

“It is ac­tu­ally a para­dox­i­cal sit­u­a­tion,” com­mented Al­lianz SE Chief Economist Michael Heise.

“On the one hand, the risks in the world are con­stantly in­creas­ing – just think of cli­mate change, de­mog­ra­phy, cy­ber or pol­i­tics – but on the other hand, peo­ple world­wide are spend­ing an ever smaller pro­por­tion of their income on in­surance. A great joint ef­fort by pol­i­tics and in­dus­try is needed to close this ‘pro­tec­tion gap’.”

It was also an un­usual year for Asia: Pre­mi­ums rose by a mea­gre 2.3 per­cent in Asia (ex Ja­pan), only the se­cond time since the turn of the mil­len­nium that it trailed be­hind global growth. More­over, with an in­crease of 4.0 per­cent, even Ja­pan grew faster. The up­shot: In 2018, the re­gion ac­counted for only 16 per­cent of global growth (after a whop­ping 81 per­cent in 2017). The global growth engines for 2018 were two old ac­quain­tances: the US (42 per­cent) and Ja­pan (11 per­cent).

The cul­prits for this dis­mal per­for­mance are easy to pin­point: Life mar­kets both in China and Korea – which ac­count to­gether for 40 per­cent of the to­tal re­gional pre­mium pool

(ex Ja­pan) – shrank in 2018. In China, this was mainly due to a reg­u­la­tory crack­down on in­surance in­ter­me­di­aries sell­ing wealth man­age­ment prod­ucts.

“2018 does not mark the end of the Asian growth story,” com­mented Al­lianz Re­search Economist Michaela Grimm.

“On the con­trary, the stricter over­sight in China is more than wel­come, sig­nalling the next phase of a more bal­anced and sus­tain­able de­vel­op­ment. Cou­pled with the breath­tak­ing tech­no­log­i­cal progress in the mar­ket – it is the clear fron­trun­ner in the ap­pli­ca­tion of AI or in­no­va­tive pay­ment so­lu­tions – China is the mar­ket to watch. It’s the best place to learn about the fu­ture of our in­dus­try. ‘Sold in China’ is the new gold stan­dard in in­surance.”

Ac­cord­ingly, Al­lianz Re­search expects this year a re­bound in Asia (ex Ja­pan), pro­pel­ling pre­mium growth to al­most 11 per­cent.

Pre­mi­ums in Sri Lanka grew by 12.1 per­cent in 2018, way above the re­gional av­er­age. Also in con­trast to most other Asian coun­tries, the to­tal pre­mium pool (with­out health) is evenly split be­tween prop­erty-ca­su­alty and life and pre­mi­ums in both seg­ments in­creased in per­fect sync.

For this year, Al­lianz Re­search expects a con­tin­u­a­tion of high growth, with a slight ac­cel­er­a­tion to around 13 per­cent. This rapid de­vel­op­ment with dou­ble-digit growth through­out the last two decades notwith­stand­ing, Sri Lanka’s in­surance mar­ket is still one of the least de­vel­oped in the re­gion: Pre­mi­ums per capita stood at EUR 41 in 2018 (be­low neigh­bour­ing In­dia with EUR 52) and pen­e­tra­tion at 1.1 per­cent, which is still the low­est ra­tio in the re­gion.

Al­lianz Re­search expects in­surance mar­kets to con­tinue to re­cover, with global pre­mium growth fore­cast to reach around 5 per­cent in the next decade. Growth ex­pec­ta­tions for Asia (ex Ja­pan) are no­table higher – the re­gion should achieve growth of 9.4 per­cent p.a. over the next decade; in Sri Lanka, mar­ket growth of 12.2 per­cent is fore­seen (13.7 per­cent in life and 10.6 per­cent in p&c). All in all, around 60 per­cent of additional pre­mi­ums will be gen­er­ated in Asia (ex Ja­pan).

Newspapers in English

Newspapers from Sri Lanka

© PressReader. All rights reserved.